Japan’s Contribution to Trade Rules:
TPP, Mega FTAs, and Ahead
December 16, 2013
Michitaka NAKATOMI
Consulting Fellow, RIETI
Ⅰ Japan and Trade Rules
1. Japan is an advanced country in trade rules
2. Contributing to many advanced areas and committed firmly to establishing better
trade rules (A little known fact)
3. Specifically…
1) Investment
Promoted Doha Round negotiations on investment
FTA investment chapters and bilateral investment agreements (Japan-China-Korea,
etc.) → Promoting both protection and liberalization
Investor-to-state dispute settlement (ISDS provisions included in all FTAs/EPAs
concluded by Japan except for the Japan-Philippines EPA)
2) Services
Japan is a member of the Really Good Friends of Services (RGF) group negotiating a
Trade in Services Agreement (TISA) → Japan submitted its proposal
Negative list approach → Adopted in FTAs/EPAs (in combination with the positive list
approach)
Japan has no MFN exemptions under GATS
2
Ⅰ Japan and Trade Rules
3) Trade facilitation
Japan cooperated for achieving an agreement at the WTO
4) Issues relating to the digital economy
・ Actively contributing to the Information Technology Agreement (ITA1 + ITA2) (See
Nakatomi 2012b)
→ ITA is a productive result of Japan-U.S. cooperation
→ Seeking to expand the scope of items covered by the ITA (in cooperation with the
United States)
・ E-commerce
→ Promoting the concept of “digital products”; customs duty moratorium on electronic
transmissions
→ E-commerce chapter (Japan-Switzerland EPA)
・ Japan-U.S. Trade Principles for Information and Communication Technology (ICT) Services
→ Confirming the Japanese and the U.S.’ common position
3
Japan-U.S. Trade Principles for ICT Services
1. Transparency
2. Cross-border information flows
3. Open networks, network access and use
4. Interconnection
5. Unbundling of network elements
6. Local infrastructure and local presence
7. Foreign ownership
8. Use of spectrum
10. Regulatory authorities
11. Authorizations and licenses
12. International cooperation
Ⅰ Japan and Trade Rules
5) Intellectual property rights
→ Anti-Counterfeiting Trade Agreement (ACTA): Enforcement of copyright and
trademark protection
Japan is the only country that has ratified the ACTA
6) Technical barriers to trade (TBT)
→ 2nd triennial review: Definition of international standards, etc.
→ Japan attempted to bring TBT issues into the Doha Round agenda
7) Competition
Promoted Doha Round negotiations on competition
8) Procurement
Japan is party to the Agreement on Government Procurement
One-stop website for information on procurements by local governments (JETRO)
5
Ⅰ Japan and Trade Rules
4. Conclusion of high-level FTAs/EPAs
A network of comprehensive, high-level FTAs covering a broad range of items
Seeking to expand the network of FTAs/EPAs (TPP, RCEP, Japan-EU, Japan-China-Korea)
6
Development of Japan’s EPA/FTA Network
In force/Signed
( 12 countries and 1 region )
In force/Signed
Under Negotiation
Joint Study
Singapore
Asia
Malaysia
Thailand
Asia
Indonesia
China-Japan-Korea FTA
India
Mexico
Latin America
Brunei
Japan-EU・EPA
Vietnam
Chile
Peru
ASEAN
Europe
Switzerland
Philippines
TPP
Under Negotiation
( Trans-Pacific Partnership )
( 5 countries and 5 regions )
RCEP
( Regional Comprehensive Economic Partnership )
( ASEAN, Japan, China, Korea, India, NZ and Aus )
Asia
Asia/
Pacific
Mongolia
Pacific
Australia
C-J-K
Europe
EU
RCEP
North
America
Canada
Republic of Korea
(Negotiation
suspended )
Latin
America
Colombia
TPP
Middle East
GCC*
Joint Study
( 1 country )
Middle
East
Turkey
* GCC: Gulf Cooperation Council (UAE, Bahrain, Kuwait, Oman, Qatar, Saudi Arabia)
7
Ⅱ Commitment to Global Rules
・ The WTO and FTAs/EPAs are the two pillars of Japan’s trade
policy
・ Concept of “unified axis” (coherent approach)
“Proposals for Redefining of Trade Strategy: Towards a proactive new
trade strategy that takes the initiative to establish global rules”
April 16, 2013, Keidanren
8
Ⅱ Commitment to Global Rules
a. Pursue regional FTAs (TPP, Japan-China-Korea FTA, RCEP as a step
towards FTAAP, Japan-EU EPA)
b. Establish a common approach as a “unified axis” for Japan to negotiate
trade and investment rules to ensure coherency across Japan's various
FTAs with a view to establishing rules that can be adopted in the future
multilateral regime (part of WTO agreement)
c. Proactively pursue issue/sector-specific agreements (e.g., revision of WTO
Information Technology Agreement [ITA], the Trade in Services
Agreement [TISA]) and encourage developing country involvement in
such agreements
d. Continue utilization of WTO functions (compliance monitoring and dispute
settlement) and efforts to amend and formulate rules
9
Ⅲ Importance of Global Value Chains
and Japan’s Contribution
Analysis of trade in value added (TiVA)
→ Joint study by the WTO and IDE-JETRO (July 2011)
Connectivity support
→ Support physical, institutional, and people-to-people connectivity
→ From ASEAN to Asia Pacific
・Business community’s commitment (See Keidanren’s proposal)
10
WTO/ IDE-JETRO Study on Global Value Chains
Joint report was published in June 2011
The report analyzes the development of global value chains (GVCs) in the east Asian
region
(http://www.wto.org/english/res_e/booksp_e/stat_tradepat_globvalchains_e.pdf)
11
Global Value Chains (WTO/ IDE-JETRO Report)
 Issues of “global value chains” and “vertical specialization” highlighted
・ Diversity and complementarities of production networks cause “fragmented value chains”
・ Applying the concept of “country of origin” is becoming increasingly difficult
 Importance of lowering trade barriers
 A new trade regime is needed, as firms go beyond national boundaries
United States-China trade balance :
Traditional statistics versus value added (VA) terms
(in billions of US$)
Development of cross-national production linkages, 1985-2005
Note: China’s processing trade data not available for 2000.
Sources: UN Comtrade Database and WTO estimates.
Sources: IDE-JETRO
12
IV Japan’s Contribution to the ＴＰＰ
Issues pointed out in Sections I through III are elements forming a basis upon which to
complete and expand the TPP
A basis for cooperation with other participants, in particular, the United States
Key priorities in the rules area
Japan’s priorities in the TPP and other mega FTAs are closely related with issues discussed in
Sections I through III. Japan is interested in establishing highly ambitious rules in such areas as:
1) Not only market access but also trade rules; behind-the-border measures are quite important
2) Investment rules (liberalization + protection)
3) Services (market access, national treatment + α）
4) Protection of intellectual property
5) Domestic regulations (TBT)
6) Making rules for information society (e-commerce, telecommunications + α)
Japan-U.S. cooperation is possible and important
13
V Direction for Cooperation:
TPP and beyond
1. GVC perspective
1) Avoid the fragmentation of trade rules; cooperation both within and outside of FTAs is
indispensable
A spaghetti bowl of trade rules is indigestible (far more serious than that of rules of origin)
Case of South Korea on international standards for electronics and electrical products, and
automobiles → Different definitions adopted in FTAs with the United States and the EU
What the business community is looking for is global rules; GVCs are changing day by day
Cooperation with an eye on the development of international public goods is needed
2) Japan-U.S.-EU cooperation is indispensable
United States: TPP , TTIP
Harmonization of
Japan:
TPP, Japan-EU, Japan-China-Korea, RCEP → mega FTAs is an
urgent issue
EU:
Japan-EU, TTIP
3) Whole of the supply chain approach (See the WEF Enabling Trade Report 2013)
Think supply chain!
4) Concept of connectivity (Importance of support measures for GVC development)
14
V Direction for Cooperation:
TPP and beyond
2. Addressing 21st century challenges
Both coverage and speed are needed; the mistake of the WTO round must not be repeated
3. Global solution and a perspective of making multilateral rules for the future
Cooperation and joint initiatives both within and outside of FTAs are needed
Cooperation with an eye on future multilateral rules (WTO rules) and the selective and
efficient use of tools are crucially important (Not only mega FTAs but also an issue-based
plurilateral framework should be considered)
(See Nakatomi 2013b for the plurilateral approach, Nakatomi 2012b for cases of ACTA and
ITA, and Nakatomi 2012a and 2013a for the International Supply Chain Agreement)
4. Full-scale government-business and business-business cooperation
Full-scale cooperation and dialogue between governments and business communities, and
within business communities themselves are needed
In particular, it is essential for the Japanese and U.S. business communities to strengthen
cooperation
15
V Direction for Cooperation:
TPP and beyond
5. Proving economic benefits is crucial
Elimination of non-tariff barriers has a significant economic impact (See Petri et al. 2012)
Further development of economic models is needed
6. Approach to developing countries
Addressing the interest of developing countries by giving due consideration to their needs is the key
Capacity Building
Technical Assistance
Connectivity
Dispute Settlement?
Discriminatory agreements or MFN extension of benefits to non-members?
→ MFN extension is a crucial issue for consideration; ITA, Basic Telecommunication Services
Agreement, and Financial Services Agreement are based on critical mass and the MFN extension
of benefits to non-members
→ Securing an appropriate balance between the universality of rules and the prevention of freeriding is important
16
V Direction for Cooperation:
TPP and beyond
7. Conflicting three pillars (See the chart used in the ACTA negotiation)
Ambition level
Speed of negotiation
Number of participating countries
Achieving the three goals of “highly ambitious rules,” “early conclusion,” and a
“large number of participants”
→ Big challenge going forward
→ Requires full-fledged cooperation between the governments and business
communities of Japan and the United States
17
Reference
Keidanren (2013), “Proposals for Redefining of Trade Strategy: Towards a proactive new trade
strategy that takes the initiative to establish global rules,” April 16, 2013.
Nakatomi, M. (2012a), “Concept Paper for an International Supply Chain Agreement (ISCA)—
Improving global supply chains by an issues-based plurilateral approach,” Research Institute of
Economy, Trade and Industry, Tokyo.
Nakatomi, M., (2012b), “Exploring Future Application of Plurilateral Trade Rules: Lessons from
the ITA and the ACTA,” RIETI Policy Discussion Paper Series 12-P-009, Research Institute of
Economy, Trade and Industry, Tokyo.
Nakatomi, M. (2013a), “Global Value Chain Governance in the Era of Mega FTAs and a Proposal
of an International Supply-chain Agreement,” VoxEU Column, August 15, 2013.
Nakatomi, M. (2013b), “Plurilateral Agreements: A viable alternative to the WTO?” ADBI
Working Paper No. 439, Asian Development Bank Institute, Tokyo.
Petri, Peter and Michael G. Plummer (2012), "The Trans-Pacific Partnership and Asia-Pacific
Integration: Policy Implications," Peterson Institute for International Economics Policy Brief.
World Economic Forum (2013), “Enabling Trade—Valuing Growth Opportunities 2013,” World
Economic Forum, Geneva.
WTO/IDE–JETRO (2011), “Trade Patterns and Global Value Chains in East Asia: From Trade in
Goods to Trade in Tasks,” WTO/IDE–JETRO, Geneva and Tokyo.